From her smallholding in southern Rwanda, Beneconcille Murekezi produces enough green coffee beans to ensure her three children get to school each day. That is some achievement, as Rwanda tentatively recovers from genocide 10 years ago.

As a member of a cooperative which sells coffee beans to a UK firm, Union Coffee Roasters, Murekezi, 38, is in a perilous position. In fact, she is in a poverty trap. There is a ceiling through which real improvements to her life and community cannot break through.

Murekezi and thousands of her co-operative colleagues would like to process all the beans rejected by Union Coffee Roasters to produce their own roasted coffee. Micro bank loans would enable the co-op to invest in new machinery. But under arcane world trade rules known as tariff escalation, Murekezi's co-operative cannot 'add value' to their beans without incurring punitive financial penalties that would make the whole project unviable.

Instead it is giant food companies such as Nestlé that have the right to roast African and South American beans in Europe, which is where the healthy margin is. The poverty trap really hurts, as coffee prices on world commodity markets have plummeted. Murekezi's 300 coffee trees, which produce the cherry-like fruit in which the beans are found, would have been worth $500 five years ago: today it's $300. This puts Rwanda in a nightmare situation. Nearly a third of its exports are in coffee, a depreciating commodity.

'(Tariff escalation) holds back export-led growth and greater diversification in developing countries. Tariff escalation prevails in a large number of agricultural commodity chains in both developed and developing countries. It is more pronounced in commodity sectors such as meat, sugar, fruit, coffee, cocoa, and hides and skins, most of which are of export interest to many of the poor developing countries,' says Nasredin Elamin, an economist at the UN's Food and Agriculture Organisation.

'I would like to build extra rooms in my house. It would be nice to be able to use our work as a way to make ourselves more comfortable,' Murekezi says from her mud hut. 'But there is no way out.'

The sheer weight and range of subsidies affects every facet of agricultural life in the developing world. Chicken farmers in Ghana are being forced out of business because they cannot compete with frozen chicken imports subsidised by European taxpayers. Trade campaigners call this 'dumping': EU subsidies allow farmers to sell goods at below-cost prices and make a profit; and when there is over-production in rich countries, the surplus gets sold into poor countries such as Ghana. Poultry farming is not directly subsidised under the CAP, but wheat production is, and paying for grain to feed chickens is a major cost. Ghana imported 36,000 tonnes of chicken in 2003, much of it from Europe.

Ghana is one of the 18 countries which will immediately benefit from the $55bn debt forgiveness package agreed by G8 finance ministers. But by refusing to give up the CAP, campaigners say Europe is giving with one hand, taking with the other. And Ghana's chicken farmers are not alone. The Dominican Republic was the fifth largest market for CAP-subsidised European milk exports last year; Indonesian rice-producers find it impossible to compete with cut-price US rice; and India imports sugar from Europe, where farmers in the Paris basin, and even in Finland, are subsidised to grow it. These three examples were singled out by Oxfam in a report about agricultural dumping which it published last week.

Ghana's chicken farmers won the support of parliament for a measure which would have raised import taxes to protect the industry; but according to a report by Christian Aid earlier this year, the International Monetary Fund and World Bank warned the government against implementing the proposal. And since the World Bank and IMF are the gatekeepers for debt forgiveness, the government complied.

Most campaigners believe that trade barriers in both rich and poor countries will eventually have to come down, increasing the flow of global trade and bringing huge benefits to rich and poor. But while Europe and the US are still subsidising their farmers, Oxfam, Christian Aid and other groups believe African countries should be able to shelter their much less developed industries.

'You need to have aid and debt flows as well; there has been a sustained agricultural crisis in much of the developed world for the last 20 years: internal markets have collapsed,' says Matt Griffith, trade policy analyst at Cafod.

The inability to trade their way out of poverty means aid from rich countries fails to build sustainable long-term growth, believes CBI director-general Digby Jones. 'Without scrapping the CAP, all that will happen is that Swiss bank accounts will get fatter. Of course, Africa needs more money, but if it's not linked to ending agricultural subsidies in Europe, and in particular France, then it's blatant hypocrisy. The way to build lasting sustainable economic growth, healthcare, roads and education is for Europe to end the CAP. Stopping trade distorting subsidies will allow African products to be exported and stop European goods being sold more cheaply in Africa.'

Business investment in Africa is falling. Other than telecommunication, mining and energy firms, international business is withdrawing. The poorest people are often most adept at fostering creative entrepreneurialism. And for banks, it is proven that the poor represent the best credit risk. The latest telecom and computer technology could transform African lives. Some multinationals such as Hewlett-Packard and Unilever are beginning to see the poor not as an intractable problem but as the biggest consumer market in the world.

But this latent job and wealth explosion is stymied by the inability of developing countries to trade their way out of poverty. Instead they are dumped on and locked out. Only moves to open protected fortresses in Europe and America allied to the ability for so-called South-South trade to take off will allow the three billion people living on less than £2 a day to improve their circumstances.

If the G8 leaders are serious about transforming the fate of Africa, they will have to exert true statesmanlike pressure to keep in check powerful agribusiness lobbies and end not just the CAP but similar subsidies in America. In the coming months, as the date draws closer to crucial trade talks in Hong Kong, we will know whether they have it in them.